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Betting the House on Small Nuclear Reactors

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Diane Cherry's picture
Principal Diane Cherry Consulting, LLC

Diane Cherry is a woman owned small business providing clean energy consulting services for local government, clean energy companies, non-profits and educational institutions. Her projects and...

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  • Oct 12, 2022

“…I’m very skeptical with regard to SMRs,” Ketchum said, highlighting the permitting difficulty in siting a project and trying to meet the U.S. Nuclear Regulatory Commission’s standards for safety and security.

They are going to be very expensive, and then you’re going to be taking a bet on the technology…Right now, I look at SMRs as an opportunity to lose money in smaller batches.” – NextEra Energy Chairman, President and CEO John Ketchum / S&P Global Market Intelligence, October 3, 2022


North Carolina House Bill 951 is one of the most aggressive laws in the southeast driving an energy transition from expensive, obsolete sources of electricity to carbon neutral fuels by 2050. The question North Carolina faces is whether the transition will also be expensive and risky, or whether ratepayers will benefit from existing, least-cost technologies. 

Gold Plating the Energy Transition

In every scenario Duke Energy presented in recent Carbon Plan hearings, Duke Energy proposes effectively doubling its nuclear fleet. Government regulated monopolies tend to be rewarded by spending as much money as possible on capital investments. There are few incentives for these monopolies to save money for ratepayers, and they have many ‘trust us’ arguments for why they need to take the most expensive path. 

In its carbon plan submitted to the N.C.Utilities Commission (NCUC), Duke Energy acknowledged the end of an era for its coal facilities. Though the company includes many options to replace coal-fired energy, the plan’s capital cost projects favor nuclear energy as the key solution to reduce carbon emissions and power our region. NC House Bill 951 directs the development of the Carbon Plan to reduce carbon emissions by 70 percent from 2005 levels by 2030 and to achieve carbon neutrality by 2050. But only one of Duke Energy’s four proposed scenarios hit the 2030 benchmark, because the company anticipates additional time is necessary for new nuclear facility construction. Not only does the company intend to renew the licenses for its existing 11 nuclear plants, its portfolios include up to 21 new reactors by 2050. These capacity additions would mean that over 60 percent of the company’s energy mix would rely on nuclear by mid-century.

Risky and Expensive

Historically, nuclear power has been risky and expensive for ratepayers. Nuclear plants in the Carolinas have typically taken twice as long to construct and have been more than twice as expensive as projected. The southeastern United States has suffered the financial consequences first hand. In Georgia, the Plant Vogtle power station’s reactor construction has taken nearly 10 years – five years longer than anticipated. Vogtle’s  projected $14 billion budget is now 100% over budget ($30 billion) and the plant is still not complete. Similarly, South Carolina’s V.C. Summer project was abandoned after years of delays and looming anticipated expenses. The failed project never generated any electricity and left behind $9 billion in sunk costs, saddling South Carolina energy ratepayers with the bill. 

Small Modular Nuclear Reactors (SMRs) are Not Least Cost

Duke Energy intends to double its nuclear fleet by 2050. The company’s carbon plan assumes new nuclear power will come from “small modular nuclear reactors” (SMRs). SMRs have a capacity of 300 megawatts (MW) or less and will be designed with modular technology. The concept is that components will be manufactured in a factory, shipped, and then installed on-site. This is different from traditional reactors, which may have capacities of 700 MW or more, have higher up-front capital costs, require frequent fueling, and require larger amounts of land.

At face value, SMRs may sound like a viable option–the smaller modules allow for scalability and greater siting flexibility.Duke Energy claims that flexibility will be necessary to support increased renewable deployment and achieve 2050 targets. For example, SMR advocates propose utilization in underserved, remote communities that lack access to reliable, affordable, and/or clean energy. 

BUT if SMRs become commercially available and can be licensed, sited, permitted, constructed, and placed in service by 2032, as Duke proposes, there is little evidence to suggest they represent a least-cost resource solution. According to Brattle Group’s modeling filed in the NC Carbon Plan proceeding, SMRs are not selected as a least-cost resource to meet NC’s 70% GHG reduction goal, even if the compliance date is delayed from 2030 to 2032. That’s true even assuming Duke’s proprietary SMR cost estimate, which is significantly lower than EIA’s. According to Brattle’s analysis, EIA forecasts that the levelized cost of electricity (LCOE) from new SMRs will be approximately $117/MWh for projects entering service in 2032 – more than twice the LCOE for solar-plus-storage resources as forecasted by NREL in the same year.

Small Reactors, Big Questions

Though they are small compared to conventional reactors, SMRs pose outsized radioactive danger and will produce significant amounts of nuclear waste. A recent study by the U.S. Nuclear Regulatory Commission and Stanford University says that SMRs will actually generate up to 30 times more radioactive waste than conventional reactors. This waste would not be moved, but would be stored on site near the communities utilities propose to serve. Duke Energy SMRs will face serious siting challenges, especially given the company’s track record of sloppily handling past energy waste –think of the coal ash spills which cost ratepayers $2.9 billion. 

SMRs Don’t Actually Exist Yet

Perhaps the greatest current problem with SMRs is that they don’t actually exist. To date, SMRs have not been deployed anywhere in the world:

  • In 2020, Oregon-based company NuScale was approved to develop a demonstration project. It took six years to obtain this approval–the project was initially submitted back in 2014. 
  • NuScale initially expected to deliver its first reactor in 2016, but the project design has changed (and downsized) many times throughout the development process. Current estimations project operationalization no sooner than 2029.

North Carolina’s House Bill 951 (which mandated the carbon plan) requires a 70 percent emissions reduction by 2030. Duke Energy portfolios based this technology bet uncertain will not meet the law’s target

Other utility companies are more skeptical of this yet-to-exist energy source. NextEra Energy’s CEO recently called SMRs a “very expensive…bet on technology.” The Institute for Energy Economics and Financial Analysis (IEEFA) says that these early forays into SMRs–such as NuSCale’s project–are already “too late, too expensive, too risky, and too uncertain.”

Available Clean Energy Options

Reliable, safe, cost-effective clean energy exists right now. By the time SMRs come online–if they do at all–they will have been eclipsed in price, build speed, and efficiency by renewables and battery storage technology. Present projections estimate that NuScale’s SMR, if completed early (by 2026), would have a  levelized cost of energy (LCOE) of $66.56 per MWh. Other estimates set NuScale’s lower-bound cost at $45/MWh and $94.65/MWh on the high end. Compare these prices to utility-scale solar and wind: the LCOE for each option ranges between $28 and $37/MWh (solar) and $26 and $50/MWh (wind) without government subsidies. Subsidized prices sit at the lower bound of those estimates. 

At present, Duke Energy’s planning caps and/or excludes clean, dependable resources and relies on unpredictable future promises. SMRs won’t exist for at least a decade and may never be close to cost competitive with today’s readily available renewables and storage options. Delaying North Carolina’s energy transition with a bet on future technologies means money saving, clean, existing technologies will be underutilized in this decade. In delaying a commitment to renewables, Duke Energy gambles with ratepayers’ wallets. 

More Discussion of Small Modular Reactors

Bill Gates’ nuclear startup wins $750M, loses sole fuel source (Canary Media, August 22, 2022)

NuScale, compact nuclear plant developer, plans to go public (Marketplace, January 12, 2022)

Utah Cities Encouraged to Once Again Exit Struggling Nuclear Project (Utah Taxpayers Association, July 19, 2021) 

Utah city abandons small modular reactor project (S&P Global Market Intelligence, August 25, 2020)

Analyzing the Cost of Small Modular Reactors and Alternative Power Portfolios (Energy Strategies, May 2019)

Duke shuts down Brunswick nuclear plant ahead of Hurricane Florence (Utility Dive, September 13, 2018)

Matt Chester's picture
Matt Chester on Oct 12, 2022

The development process has been long and expensive, but I'd say that's to be expected. And it's not betting the house, because the goal of SMRs will be additive to the clean energy transition, not that any utility needs to look at them as the only decarbonized option. A mix of SMR and other clean energy tech (wind, solar, geothermal, hydropower, even hydrogen and yet to be developed tech) will all play a critical role. 

Julian Silk's picture
Julian Silk on Oct 12, 2022

This is to agree with Matt Chester again. SMRs will be developed and used in this decade, probably in Southwest Virginia, in accordance with the wishes of Governor Youngkin. They will have some of the same difficulties of the larger nuclear reactors, in lesser measure. The people who want the SMRs will not go for renewable energy, which is not seen (rightly or wrongly) as politically desirable for their constituents. Nuclear equals jobs for the supporters, while renewables equals support for "the wrong side" and no jobs. It will not be a final, decisive, outcome either way.

Diane Cherry's picture
Diane Cherry on Oct 12, 2022

One of the key requirements for HB 951 in NC is that generation sources be least cost to ratepayers. I'm not certain if the path forward with SMRs will meet that standard. 

Michael Keller's picture
Michael Keller on Oct 18, 2022

Suspect that same law would rule out (as it should) offshore wind which is exceptionally expensive.

The SMR’s are smaller and less efficient than their large conventional cousins. Historically, production costs go down by making power plants (including renewable generation) larger and more efficient.

The largest driver in nuclear costs are regulations. The proposed regulations for advanced reactors are actually more complicated than current regulations. Not a good omen.

Building stunningly expensive power plants (of any kind) just to produce “zero” carbon energy is not financially or environmentally sound.

Seems to me the objective of energy production should be reliable, reasonably affordable, and environmentally reasonable energy.

PS By full disclosure, my firm is developing a hybrid SMR. However, we believe the driver for nuclear should be based fundamentally on sound economics. The barriers to achieving that goal, for all SMR’s, are significant and should not be glossed over.

Diane Cherry's picture
Diane Cherry on Oct 20, 2022

I don't disagree that offshore wind is expensive. But I can't emphasize enough that there is least cost energy now that doesn't have the baggage of SMRs and that is much more what I'm trying to get across.

Michael Keller's picture
Michael Keller on Oct 21, 2022

Solar and wind are of limited usefulness because of their unreliability. Ignoring that aspect in least cost analyses is common for a variety of reason.

The problem is particularly insidious when investment firms owning (or underwriting) green energy assets are involved with least cost analyses.  Generally, such firms receive huge financial advantages from the government; e.g. outright production credits, renewable mandates, fees garnered structuring deals, etc.. Essentially, the firms have or promote zero risk investments and have huge incentives to retain that advantage. Hence, their analyses are typically skewed. 

The flaw in many “least cost” green energy assessments becomes crystal clear when the cost of electricity is compared between states excessively favoring green energy and those that do not. Case in point, California. Residential rate are 3 times what I pay in Kansas.

In the final analysis, can SMR’s be least cost? Right now, no.. However, go back decades and look at the cost of green energy. Was it least cost? Not even close. Solely using “least cost” would have doomed renewable energy.

Seems to me, a more reasonable approach is in order. Promising technologies should be pursued because they may ultimately be competitive in the marketplace. Those that cannot make the cut end up in the pile of machines that never quite worked as hoped.

Diane Cherry's picture
Diane Cherry on Oct 22, 2022

Energy prices are going up across the board but green energy is not to blame. Look at natural gas prices in Europe. Think about it - when you are building natural gas plants you have to constantly fuel it - renewable energy sources don't have that concern. CA prices are now because of wildfires and natural gas price volatility. Competitiveness in the market is also an issue when utility business models are vertically integrated - so there is another entire argument that I didn't even go into - competition is non existent.

Roger Arnold's picture
Roger Arnold on Oct 23, 2022

Energy prices are going up across the board but green energy is not to blame.

I think the correct statement would be that green energy is not solely to blame. The high cost of electricity (COE) in California and Germany predates spiking gas prices in Europe. Soaring gas prices have aggravated the problem, because green energy has driven a transition from coal to natural gas for providing power when wind and solar are under-producing. But even when gas prices were low, regions with high penetration of wind and solar had higher COE than elsewhere.

The reason for the higher COE is no mystery. The addition of wind and solar resources increased the total capital cost of the system without increasing the energy delivered. It simply reduced the average capacity factor of the overall system.

LCOE studies that ignore the consequences of weather-driven intermittency are fundamentally flawed.

Mark Silverstone's picture
Mark Silverstone on Oct 14, 2022

Thanks for this post and analysis.

It is hard to imagine a worse bet. SMR advocates want us to ignore the fact that the technology is unproven to be feasible, let alone safe, cost effective and still no waste solution is even suggested. And, as the author suggests, NC and Duke actually seem to want to ignore existing renewable solutions while they wait to answer crucial questions regarding SMRs for at least 8 more years. 
The interests of rate payers are at the bottom of their list of priorities.

Utter folly. 

Diane Cherry's picture
Diane Cherry on Oct 20, 2022

Appreciate your response.

Roger Arnold's picture
Roger Arnold on Oct 23, 2022

The interests of rate payers are at the bottom of their list of priorities.

Hard to argue with that. But the usual alternative to regulated investor-owned utilities is no better. In a public utility, the interests of rate payers may be a nominal priority, but it quickly turns into the interest of the bureaucratic administrators and the vendors who are able to influence them. In the end, it all comes down to the people who run the system, and those who take the time and effort to learn how things work, and are then willing to devote themselves to making the system work.

It's a lesson I learned when I was serving as a systems analyst in the U.S. Army: no system is so perfect that a**holes who don't care can't f**k it up, and few systems are so hopeless that competent individuals who care -- and are given authority to try -- can't cobble up ways to make it work.

Michael Keller's picture
Michael Keller on Oct 25, 2022

The interests of the rate payers are at the bottom of the priority list for the offshore wind projects proposed for the East coast.

Looks to me like an underlying theme in all this is foisting financial risk on the consumer and taxpayer, with no particular risk to the utilities and investors proposing the projects.

Diane Cherry's picture
Diane Cherry on Oct 25, 2022

Very astute way to sum this up.

Julian Silk's picture
Julian Silk on Oct 21, 2022

I'm not saying I agree with the following, which I think is strained at best.  But renewable energy has an identification with liberal Democrats, which enrages Republicans, and so prevents a neutral analysis.  Nuclear energy in the form of SMRs has achieved acceptable status among them.  In states like Virginia and in more politically conservative states, this will enable SMRs to be built, regardless of their negative features.  An example of the dislike is the following -


Diane Cherry's picture
Diane Cherry on Oct 22, 2022

My point is not to suggest that it is not in generation mixes for the future BUT that there are serious serious flaws with relying on that generation source because the overpromising on delivery it I believe will not be delivered. And NC and VA both have similar political situations (VA has a R governor and R House and D Senate; NC has a D governor, house and senate are R) but there are solar facilities all over in rural conservative areas because these counties need the tax base which does not require anything in terms of additional expenditures like more schools or other infrastructure. I've talked with plenty of R who see clean energy as a great solution purely from a business perspective.

Julian Silk's picture
Julian Silk on Oct 25, 2022

Let me make a brief comment and be done with this.  I thank Diane Cherry for her article, which is valuable.  It is possible that SMR developments in Canada and the UK will be less influenced by politics than in the U.S., and so provide a more accurate picture of the LCOEs of SMRs.  Personally, if they can be found willing to state so publicly, I would value quotable sources on the Republicans who are in favor of renewable energy.

Mark Silverstone's picture
Mark Silverstone on Oct 26, 2022

For what it is worth, according to Pew:

«Most U.S. adults continue to support expanding solar panel farms (84%) and wind turbine farms (77%), but Republicans and Democrats are increasingly divided in views on these two energy sources, according to a recent Pew Research Center survey

It surprises me that the numbers are so high. Not so much that the divisions are increasing.

But there is this;

«A common misconception in today’s hyper-polarized world is that people more aligned with the political left are more in favor of renewable energy than those that politically lean to the right, who presumably want more fossil fuels. While this might feel like the case given the current state of our national caricature, the local story can be more nuanced.»

And, perhaps inevitably, this:

«While major outages haven't happened so far, GOP elected officials and fossil fuel supporters still used the report to bash the shift to renewable power.

" 'Biden blackouts' will make it impossible to run even fans and air conditioners on the hottest days of the summer," said Iowa Republican Sen. Joni Ernst during a speech on Capitol Hill in July, claiming these outages would be the result of "the Democrats' push towards renewables."»

Needless to say, nothing of the sort happened.

Diane Cherry's picture
Diane Cherry on Oct 27, 2022

That's so interesting and it is perplexing why energy has to be politicized at all.

Michael Keller's picture
Michael Keller on Oct 26, 2022

Is easier to license the reactors in Canada; US regulators have penchant for dictating design details, as opposed to the Canadians who expect the designers to demonstrate the safety of their design.

I am in favor of cost effective, reliable, and environmentally reasonable energy production. That includes renewable energy. However, the SMR’s in the US clearly face daunting challenges, and that realistically includes cost. I think the more likely path is Canadian development while the US more or less stumbles about with the government exacerbating the ability of the market place to pick winners. In that scenario, there might not be a nuclear winner. Rather, a heavily subsidized but short lived really expensive advanced technology may be crowned by the government, with utilities not particularly interested in such a very risky investment.

Diane Cherry's picture
Thank Diane for the Post!
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